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Improving Access to Credit for First-Time Home Buyers under Borrower-Based Measures

Author

Listed:
  • Gabriella Grosz

    (Magyar Nemzeti Bank)

  • Gabor Izsak

    (Magyar Nemzeti Bank)

  • Alexandr Maxim Palicz

    (Magyar Nemzeti Bank)

  • Katinka Szasz

    (Magyar Nemzeti Bank)

Abstract

As a result of the dynamic rise in real estate prices in recent years, house prices, and therefore the minimum down payment required to obtain a mortgage, more than tripled by 2022 compared to 2014. This led to a deterioration of access to borrowing opportunities typically for young first-time home buyers aged 35 or younger, especially among clients who are not eligible for family support schemes. In this paper, we provide a detailed overview of the potential side effects of the borrower-based measure framework on first-time home buyers. Relative to their credit risk, these clients may be more severely affected by borrower-based measures, generating negative second-round effects. Therefore, in their case preferential limits may be applied, in line with international practice, notably on the level of down payment. However, when making such a decision, it is important to take into account the development of risks in the housing and credit markets and the macroeconomic environment.

Suggested Citation

  • Gabriella Grosz & Gabor Izsak & Alexandr Maxim Palicz & Katinka Szasz, 2023. "Improving Access to Credit for First-Time Home Buyers under Borrower-Based Measures," Financial and Economic Review, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 22(2), pages 25-53.
    • Handle: RePEc:mnb:finrev:v:22:y:2023:i:2:p:25-53
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    References listed on IDEAS

    as
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    5. Péter Fáykiss & Alexandr Palicz & János Szakács & Márton Zsigó, 2018. "Experiences of Debt Cap Regulations in Hungarian Retail Lending," Financial and Economic Review, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 17(1), pages 34-61.
    6. Gabriel, Stuart & Painter, Gary, 2020. "Why affordability matters," Regional Science and Urban Economics, Elsevier, vol. 80(C).
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    financial stability; real estate overheatedness; excessive lending; macroprudential policy; borrower-based measures; loan-to-value ratio; debt-service-to-income ratio; first-time home buyer;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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